Both the South Korean won and the Japanese yen have depreciated to multi-year lows against the U.S. dollar, but the underlying causes for each currency's weakness are distinct. According to Kang-Kook Lee, a professor at Ritsumeikan University's Graduate School of Economics, South Korea's won is under pressure due to a structural shift in the behavior of major Korean exporters. These conglomerates are increasingly retaining their overseas earnings rather than repatriating them, which reduces the domestic supply of foreign currency and exerts downward pressure on the won. This marks a significant change in South Korea’s external balance and currency dynamics [1].
In contrast, the yen's decline is primarily attributed to Japan's ultra-loose monetary policy. The Bank of Japan continues to maintain negative interest rates and yield curve control, diverging from other major central banks that have tightened policy in response to inflation. This policy stance has made the yen a favored funding currency for carry trades, leading to persistent selling. Technical analysis indicates that key support levels for the yen have broken down, and there is little immediate catalyst for a reversal [1].
Financial markets are closely monitoring whether South Korea will intervene to support the won or if Japan will adjust its monetary policy. However, authorities in both countries have so far refrained from direct intervention, opting instead for verbal statements and market monitoring. The ongoing weakness of both currencies raises concerns about potential capital outflows for South Korea and import-driven inflation for Japan [1].
Traders are watching critical price levels: the won has tested support around 1,350 to the U.S. dollar, while the yen has weakened past 145 per dollar. Technical indicators suggest further downside is possible for both currencies unless there is a change in policy or market sentiment. The prevailing market consensus is that, absent a shift in South Korean corporate behavior or Japanese monetary policy, both the won and the yen may remain under pressure for the foreseeable future [1].
CONCLUSION
The won and yen are both facing significant downward pressure, but for fundamentally different reasons: corporate financial strategies in South Korea and monetary policy divergence in Japan. Without a change in these underlying factors, markets expect continued weakness in both currencies, with potential risks for capital flows and inflation.